Sprite means a group of pixels that are moved and displayed as a single unit, a kind of graphical object.
"The term 'sprite' is a holdover from older computer and game machines. These older boxes were unable to draw and erase normal graphics fast enough for them to work as games. These machines had special hardware to handle game-like objects that needed to animate very quickly. These objects were called 'sprites' and had special limitations, but could be draw and updated very fast... These days computers have become generally fast enough to handle sprite-like objects without dedicated hardware. The term 'sprite' is still used to represent just about anything in a 2D game that is animated."
(excerpted from "Pygame Tutorials - sprite module instruction" by Pete Shinners http://www.pygame.org/docs/tut/spriteintro.html)